Problems with NJ Co-op

Problems with NJ Co-op

Looking for advice at this point. Facts as follows - I've owned a co-op in northern NJ since 1986. Due to a variety of economic factors (wife's job loss and inability to find full-time work, my earnings are down over $30,000 from 3 years ago) I'm finding myself unable to continue paying the monthly maintenance. The co-op has been a rental property since 2000 but unoccupied since August 2010. I have diligently marketed the property both as a rental and as a sale. The co-op board has turned down 1 potential tenant and 2 potential buyers. I did file a Chapter 7 in Dec. 2011 but could not include the maintenance in the filing. The bankruptcy trustee wanted no part of the co-op. I'm 4 months behind and am getting threatening letters from the co-op board. Yes, I have informed the board of my situation and sent small payments of $100-200 as I can afford. Ideally I would have liked to sell my shares but at this time would be very willing to let the co-op have the apartment back, pay off the past due balance, have no further benefit or responsibilities involving the co-op. I owe about 3 1/2 more years worth of mortgage but $170 per month for that I can handle. Suggestions on how to handle this situation and options that I may not have considered are welcomed. PS - My wife and I moved out of NJ earlier in 2012 in order to further lower our cost of living. We are not being irresponsible in the sense that we are not spendthrifts Please advise.

Re: Problems with NJ Co-op

I have diligently marketed the property both as a rental and as a sale. The co-op board has turned down 1 potential tenant and 2 potential buyers.

Apparently getting a buyer or renter approved by a co-op board can demand some ingenuity and subtlety:

http://www.bogleheads.org/forum/viewtopic.php?t=69080

Did your co-op board tell you why your prospective tenant and buyers were each rejected?

cyclelvi:

Ideally I would have liked to sell my shares but at this time would be very willing to let the co-op have the apartment back, pay off the past due balance, have no further benefit or responsibilities involving the co-op.

I doubt they even have any way to do that. You could read the co-op documents to see if the rules allow for that; almost certainly they don't.

My guess, based on what you have told us, is you just have to work harder (and perhaps smarter) at selling or renting the unit. Do your best to find out or figure out what this board is looking for, and to find buyers that fit. Maybe now that you aren't paying the maintenance they will be a bit less picky about prospective buyers - ?

cyclelvi:

My wife and I moved out of NJ earlier in 2012 in order to further lower our cost of living.

Is it really costing you less to live where you live and pay the maintenance on this empty apartment than it would cost to live in the apartment? You'd have to be saving enough money on everything else to more than make up for the entire cost of the new place. That's tough to do, unless you're living with family for free or close to it.

Obviously, if you can't commute to your job from the co-op, that'd be a little problem with the moving-in idea.

All the months of maintenance you're failing to pay are going into a ledger of what you owe. I read that you have to wait 8 years after completing a Chapter 7 bankruptcy before you can file Chapter 7 again, and 4 years before you can file Chapter 13. In that time you are vulnerable to wage garnishments, bank account levies, liens on property, etc. So you really want to do your best to pay those monthly maintenance dues, and therefore get the place either sold or rented out for enough to cover your costs as soon as you can.

There is a section on shareholders' rights to rent their units (46:8D-13.1). It looks fairly useless to me. It prohibits co-ops from having unreasonable rules against renting units, but doesn't seem to prevent them from simply rejecting prospective renters one by one.

Re: Problems with NJ Co-op

Thank you for the perspectives. It looks like I have some difficult decisions to make. The threat in the most recent letter is to revoke the proprietary lease and potentially sue for back maintenance which I'd like to avoid. I'd have to cash in a retirement account to pay the back maintenance, continue to hunt for a 2nd part-time job and continue to aggressively market the apartment.

The board did provide a sketchy reasons for not allowing the tenant (credit history) and 1 of the 2 buyers (was going to use it as an investment property but I grandfathered into being able to rent it out). The 2nd buyer was dragging their heels and the board noted "red flags".

All that I have on prior history for this co-op is that I actually purchased it back in 1986 as a repo. The previous owners reneged on paying maintenance, the apartment was repossessed and I purchased it at a great price at that time.

My realtor is going to try a different approach that's enticing to realtors so we'll see if we can get better action.

Re: Problems with NJ Co-op

Ouch. Any chance you could just borrow against it, and/or borrow from friends or relatives? But if you can't reasonably expect to pay the loan(s) back out of your net proceeds from selling the co-op then forget the borrowing idea.

Re: Problems with NJ Co-op

In a way I don't fault owner occupants from trying to sabotage the rental / investment use of a co op by means fair and foul...........especially in a place like NJ where it is extremely hard to get a bad apple tenant out....

That said, I don't know on what legal basis the co op board is turning down rental use --do you?

I have heard of some NJ owners who have broken a blockade by the ultimate of threats to a well run small community --turning the unit into 'affordable housing" but that 's a real risky poker hand to play

Things should sell if priced right for the market --even in a tough market ...BTW is the local school in that area a + or a - ...may give you some clues as to whom to target --as owner occupants...or even as rental ones.

I predict your path is easier for a lot of reasons if you find an owner occupant buyer. ...

Re: Problems with NJ Co-op

All that I have on prior history for this co-op is that I actually purchased it back in 1986 as a repo. The previous owners reneged on paying maintenance, the apartment was repossessed and I purchased it at a great price at that time.

I'm guessing you don't want that to happen to you. Better to sell it yourself for something close to fair value than to let them auction it off and then get a judgment against you for the balance owed.

By liquidating your retirement account, will you be able to bring your maintenance-dues status to fully current (so you are repo-proof) and still have enough to continue paying what you owe every month until the unit sells? Might want to set your asking price for a quicker sale if you can't hold on too long.

Since your mortgage is almost paid off, it seems likely that selling the place will do you a lot more good than renting it will. Renting it will stop the continued bleeding but will leave you vulnerable to collection actions, including repossession, for as long as you remain in arrears.

Good luck! On the plus side, it sounds as though your co-op board might be relatively reasonable

Re: Problems with NJ Co-op

Again, the sage advice is appreciated. The tenant was turned down as a credit risk. Tenants go through the same board approval process as shareholders. They want to be sure that tenants are able to pay their rent and therefore the shareholder continue to pay maintenance. They also want to be assured as best as possible of getting good neighbors. As of 2000, shareholders must occupy their units and not treat them as investment properties (ie, rentals). I was able to grandfather in because I moved out in April 2000 shortly before this edict went into play. I had minimal trouble keeping the unit rented for 10 years. One of they buyers admitted they intended to use the unit as a rental property and was rejected. The other buyer was simply noted as having "red flags". If I can sell it for even 1/2 of what I purchased it for, I would walk away with some money in hand.

Cashing in the retirement fund will stop the current bleeding only. I still have to continue finding a 2nd job that gets me 20+ hours per week in order to continue covering the maintenance. The realtor is trying a slightly different angle on the sale so maybe it works. Nothing has actually come through in over 2 years for anything therefore my skepticism.

Re: Problems with NJ Co-op

The realtor is trying a slightly different angle on the sale so maybe it works. Nothing has actually come through in over 2 years for anything therefore my skepticism.

Do you have a good idea of whether your unit is priced to sell? Are other units similar to yours, both in your co-op and in the general area, selling faster? The most common reason for a house to sit on the market longer than other similar houses is the asking price is too high.

Did your realtor present you with a good comparable-sales analysis? Can you ask for an updated one now, to see if your current asking price is low enough to be attractive? Also, if there've been prospective buyers who viewed your unit but didn't offer on it, has your realtor been asking for feedback from those people? What caused them to want to view it, and then what were the negatives that caused them to lose interest?

No need to reply, btw. Just ideas for you to consider. Maybe your realtor is doing a great job for you in a very difficult market, but it's also possible he or she isn't working that hard for you.

Re: Problems with NJ Co-op

I just verified online: retirement accounts (IRAs, 401Ks, etc) are protected from creditors. The balances are safe from all but divorce-related and child-support court orders, criminal fines, and judgments for unpaid taxes.

So I guess I would strongly recommend against liquidating your retirement account, especially if that is your only "cushion" for emergencies. Something worse than your co-op problem might come up (such as losing your remaining job?), and then you might regret having wasted this protected money on trying to save the co-op from repossession.

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